Intrinsic value of The9 Limited - NCTY

Previous Close

$1.30

  Intrinsic Value

$0.00

stock screener

  Rating & Target

str. sell

-100%

Previous close

$1.30

 
Intrinsic value

$0.00

 
Up/down potential

-100%

 
Rating

str. sell

We calculate the intrinsic value of NCTY stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 0.0

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  36.60
  33.44
  30.60
  28.04
  25.73
  23.66
  21.79
  20.11
  18.60
  17.24
  16.02
  14.92
  13.92
  13.03
  12.23
  11.51
  10.86
  10.27
  9.74
  9.27
  8.84
  8.46
  8.11
  7.80
  7.52
  7.27
  7.04
  6.84
  6.65
  6.49
Revenue, $m
  15
  20
  26
  34
  42
  52
  63
  76
  90
  106
  123
  141
  161
  182
  204
  228
  253
  278
  306
  334
  363
  394
  426
  459
  494
  530
  567
  606
  646
  688
Variable operating expenses, $m
  94
  125
  163
  208
  262
  323
  393
  472
  560
  657
  761
  874
  996
  1,125
  1,263
  1,408
  1,561
  1,722
  1,889
  2,065
  2,247
  2,437
  2,635
  2,840
  3,054
  3,276
  3,507
  3,746
  3,996
  4,255
Fixed operating expenses, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  94
  125
  163
  208
  262
  323
  393
  472
  560
  657
  761
  874
  996
  1,125
  1,263
  1,408
  1,561
  1,722
  1,889
  2,065
  2,247
  2,437
  2,635
  2,840
  3,054
  3,276
  3,507
  3,746
  3,996
  4,255
Operating income, $m
  -79
  -105
  -137
  -175
  -219
  -271
  -330
  -396
  -470
  -551
  -638
  -733
  -835
  -943
  -1,059
  -1,181
  -1,309
  -1,443
  -1,584
  -1,731
  -1,884
  -2,043
  -2,209
  -2,381
  -2,560
  -2,746
  -2,939
  -3,140
  -3,349
  -3,567
EBITDA, $m
  -77
  -103
  -134
  -172
  -216
  -268
  -326
  -392
  -464
  -544
  -632
  -726
  -827
  -935
  -1,049
  -1,170
  -1,297
  -1,430
  -1,569
  -1,715
  -1,866
  -2,024
  -2,188
  -2,359
  -2,536
  -2,721
  -2,912
  -3,111
  -3,318
  -3,534
Interest expense (income), $m
  0
  14
  -1
  4
  10
  17
  25
  35
  46
  58
  72
  87
  103
  121
  140
  161
  182
  205
  229
  254
  280
  308
  336
  366
  397
  429
  463
  497
  533
  571
  610
Earnings before tax, $m
  -92
  -104
  -140
  -184
  -236
  -296
  -365
  -442
  -528
  -622
  -725
  -836
  -956
  -1,084
  -1,219
  -1,363
  -1,514
  -1,672
  -1,838
  -2,011
  -2,191
  -2,379
  -2,575
  -2,778
  -2,989
  -3,209
  -3,437
  -3,674
  -3,920
  -4,177
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  -92
  -104
  -140
  -184
  -236
  -296
  -365
  -442
  -528
  -622
  -725
  -836
  -956
  -1,084
  -1,219
  -1,363
  -1,514
  -1,672
  -1,838
  -2,011
  -2,191
  -2,379
  -2,575
  -2,778
  -2,989
  -3,209
  -3,437
  -3,674
  -3,920
  -4,177

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  67
  89
  116
  149
  187
  232
  282
  339
  402
  471
  547
  628
  716
  809
  908
  1,013
  1,122
  1,238
  1,358
  1,484
  1,615
  1,752
  1,894
  2,042
  2,196
  2,355
  2,521
  2,693
  2,873
  3,059
Adjusted assets (=assets-cash), $m
  67
  89
  116
  149
  187
  232
  282
  339
  402
  471
  547
  628
  716
  809
  908
  1,013
  1,122
  1,238
  1,358
  1,484
  1,615
  1,752
  1,894
  2,042
  2,196
  2,355
  2,521
  2,693
  2,873
  3,059
Revenue / Adjusted assets
  0.224
  0.225
  0.224
  0.228
  0.225
  0.224
  0.223
  0.224
  0.224
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
  0.225
Average production assets, $m
  13
  17
  22
  28
  36
  44
  54
  64
  76
  90
  104
  119
  136
  154
  173
  193
  213
  235
  258
  282
  307
  333
  360
  388
  417
  448
  479
  512
  546
  582
Working capital, $m
  -85
  -113
  -147
  -189
  -237
  -293
  -357
  -429
  -509
  -597
  -693
  -796
  -907
  -1,025
  -1,150
  -1,282
  -1,422
  -1,568
  -1,720
  -1,880
  -2,046
  -2,219
  -2,399
  -2,586
  -2,781
  -2,983
  -3,193
  -3,411
  -3,638
  -3,874
Total debt, $m
  -5
  16
  40
  69
  104
  144
  189
  240
  297
  360
  427
  501
  580
  664
  753
  847
  946
  1,049
  1,158
  1,271
  1,389
  1,512
  1,640
  1,773
  1,911
  2,055
  2,204
  2,359
  2,521
  2,688
Total liabilities, $m
  60
  80
  105
  134
  169
  209
  254
  305
  362
  424
  492
  566
  644
  728
  817
  911
  1,010
  1,114
  1,223
  1,336
  1,454
  1,577
  1,705
  1,838
  1,976
  2,120
  2,269
  2,424
  2,585
  2,753
Total equity, $m
  7
  9
  12
  15
  19
  23
  28
  34
  40
  47
  55
  63
  72
  81
  91
  101
  112
  124
  136
  148
  162
  175
  189
  204
  220
  236
  252
  269
  287
  306
Total liabilities and equity, $m
  67
  89
  117
  149
  188
  232
  282
  339
  402
  471
  547
  629
  716
  809
  908
  1,012
  1,122
  1,238
  1,359
  1,484
  1,616
  1,752
  1,894
  2,042
  2,196
  2,356
  2,521
  2,693
  2,872
  3,059
Debt-to-equity ratio
  -0.680
  1.750
  3.450
  4.660
  5.550
  6.210
  6.710
  7.090
  7.390
  7.630
  7.820
  7.970
  8.100
  8.200
  8.290
  8.360
  8.420
  8.480
  8.520
  8.560
  8.600
  8.630
  8.660
  8.680
  8.710
  8.730
  8.740
  8.760
  8.780
  8.790
Adjusted equity ratio
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -92
  -104
  -140
  -184
  -236
  -296
  -365
  -442
  -528
  -622
  -725
  -836
  -956
  -1,084
  -1,219
  -1,363
  -1,514
  -1,672
  -1,838
  -2,011
  -2,191
  -2,379
  -2,575
  -2,778
  -2,989
  -3,209
  -3,437
  -3,674
  -3,920
  -4,177
Depreciation, amort., depletion, $m
  2
  2
  2
  3
  3
  4
  4
  5
  5
  6
  6
  7
  8
  9
  10
  11
  12
  13
  15
  16
  17
  19
  20
  22
  24
  25
  27
  29
  31
  33
Funds from operations, $m
  -91
  -102
  -138
  -182
  -233
  -293
  -361
  -437
  -523
  -616
  -719
  -829
  -948
  -1,075
  -1,210
  -1,352
  -1,502
  -1,659
  -1,823
  -1,995
  -2,174
  -2,360
  -2,554
  -2,756
  -2,965
  -3,183
  -3,409
  -3,645
  -3,889
  -4,144
Change in working capital, $m
  -23
  -28
  -35
  -41
  -49
  -56
  -64
  -72
  -80
  -88
  -96
  -103
  -111
  -118
  -125
  -132
  -139
  -146
  -153
  -159
  -166
  -173
  -180
  -187
  -195
  -202
  -210
  -218
  -227
  -236
Cash from operations, $m
  -68
  -74
  -104
  -141
  -185
  -237
  -297
  -365
  -443
  -529
  -623
  -726
  -837
  -957
  -1,084
  -1,219
  -1,362
  -1,513
  -1,670
  -1,835
  -2,008
  -2,187
  -2,374
  -2,569
  -2,771
  -2,981
  -3,199
  -3,426
  -3,662
  -3,908
Maintenance CAPEX, $m
  -1
  -1
  -1
  -1
  -2
  -2
  -3
  -3
  -4
  -4
  -5
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -15
  -16
  -17
  -19
  -20
  -22
  -24
  -25
  -27
  -29
  -31
New CAPEX, $m
  -3
  -4
  -5
  -6
  -7
  -8
  -10
  -11
  -12
  -13
  -14
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -32
  -33
  -34
  -35
Cash from investing activities, $m
  -4
  -5
  -6
  -7
  -9
  -10
  -13
  -14
  -16
  -17
  -19
  -22
  -24
  -26
  -28
  -30
  -32
  -34
  -36
  -39
  -41
  -43
  -46
  -48
  -51
  -54
  -57
  -60
  -63
  -66
Free cash flow, $m
  -72
  -79
  -110
  -148
  -194
  -247
  -309
  -379
  -458
  -546
  -642
  -747
  -861
  -982
  -1,112
  -1,249
  -1,394
  -1,547
  -1,707
  -1,874
  -2,049
  -2,231
  -2,420
  -2,617
  -2,822
  -3,035
  -3,256
  -3,486
  -3,725
  -3,974
Issuance/(repayment) of debt, $m
  -60
  20
  25
  29
  35
  40
  45
  51
  57
  62
  68
  73
  79
  84
  89
  94
  99
  104
  109
  113
  118
  123
  128
  133
  138
  144
  149
  155
  161
  168
Issuance/(repurchase) of shares, $m
  171
  106
  143
  188
  240
  301
  370
  448
  534
  629
  732
  844
  965
  1,093
  1,229
  1,373
  1,525
  1,684
  1,850
  2,023
  2,204
  2,393
  2,589
  2,793
  3,004
  3,225
  3,453
  3,691
  3,938
  4,195
Cash from financing (excl. dividends), $m  
  111
  126
  168
  217
  275
  341
  415
  499
  591
  691
  800
  917
  1,044
  1,177
  1,318
  1,467
  1,624
  1,788
  1,959
  2,136
  2,322
  2,516
  2,717
  2,926
  3,142
  3,369
  3,602
  3,846
  4,099
  4,363
Total cash flow (excl. dividends), $m
  38
  48
  58
  69
  81
  94
  106
  119
  133
  146
  158
  170
  183
  195
  207
  218
  229
  241
  252
  263
  274
  285
  297
  308
  321
  333
  346
  360
  374
  389
Retained Cash Flow (-), $m
  -171
  -106
  -143
  -188
  -240
  -301
  -370
  -448
  -534
  -629
  -732
  -844
  -965
  -1,093
  -1,229
  -1,373
  -1,525
  -1,684
  -1,850
  -2,023
  -2,204
  -2,393
  -2,589
  -2,793
  -3,004
  -3,225
  -3,453
  -3,691
  -3,938
  -4,195
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  -132
  -58
  -85
  -119
  -159
  -207
  -263
  -328
  -402
  -484
  -575
  -674
  -782
  -898
  -1,023
  -1,155
  -1,295
  -1,443
  -1,598
  -1,761
  -1,930
  -2,108
  -2,292
  -2,484
  -2,684
  -2,891
  -3,107
  -3,331
  -3,564
  -3,806
Discount rate, %
  5.60
  5.88
  6.17
  6.48
  6.81
  7.15
  7.50
  7.88
  8.27
  8.69
  9.12
  9.58
  10.06
  10.56
  11.09
  11.64
  12.22
  12.84
  13.48
  14.15
  14.86
  15.60
  16.38
  17.20
  18.06
  18.96
  19.91
  20.91
  21.95
  23.05
PV of cash for distribution, $m
  -125
  -52
  -71
  -92
  -114
  -137
  -159
  -179
  -196
  -210
  -220
  -225
  -225
  -220
  -211
  -198
  -182
  -164
  -145
  -125
  -105
  -87
  -70
  -55
  -42
  -32
  -23
  -16
  -11
  -8
Current shareholders' claim on cash, %
  50.0
  3.0
  0.2
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

The9 Limited (The9), formerly GameNow.net Limited is a holding company, which is an online game developer and operator. The Company operates in developing and operating online games and related services segment. It develops and operates the business of Fun Box, a home entertainment set top box, which enables online video and video games on television. It offers online games, including massively multiplayer online role playing games (MMORPGs), massively multiplayer online first-person shooter games (MMOFPSs), Web games, social games, mobile games and television games. It is also engaged in mobile advertising and mobile application education businesses. Its training services relate to smart phone application programming training provided to college students in China. It develops and operates mobile advertising platform, Juzi, under its wireless business unit. The Company's online games include Firefall and Song of Knights. Its game under development includes CrossFire 2.

FINANCIAL RATIOS  of  The9 Limited (NCTY)

Valuation Ratios
P/E Ratio -0.3
Price to Sales 3.9
Price to Book -0.6
Price to Tangible Book
Price to Cash Flow -1.2
Price to Free Cash Flow -1.2
Growth Rates
Sales Growth Rate 14.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -50%
Cap. Spend. - 3 Yr. Gr. Rate 0%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity -67.3%
Total Debt to Equity -100%
Interest Coverage 0
Management Effectiveness
Return On Assets -151.9%
Ret/ On Assets - 3 Yr. Avg. -82%
Return On Total Capital 3920%
Ret/ On T. Cap. - 3 Yr. Avg. 871.3%
Return On Equity 251.3%
Return On Equity - 3 Yr. Avg. 312.1%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 12.5%
Gross Margin - 3 Yr. Avg. -21.2%
EBITDA Margin -975%
EBITDA Margin - 3 Yr. Avg. -597.5%
Operating Margin -537.5%
Oper. Margin - 3 Yr. Avg. -491.9%
Pre-Tax Margin -1012.5%
Pre-Tax Margin - 3 Yr. Avg. -656%
Net Profit Margin -1225%
Net Profit Margin - 3 Yr. Avg. -734.3%
Effective Tax Rate 1.2%
Eff/ Tax Rate - 3 Yr. Avg. 0.4%
Payout Ratio 0%

NCTY stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NCTY stock intrinsic value calculation we used $11 million for the last fiscal year's total revenue generated by The9 Limited. The default revenue input number comes from 0001 income statement of The9 Limited. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our NCTY stock valuation model: a) initial revenue growth rate of 36.6% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 5.6%, whose default value for NCTY is calculated based on our internal credit rating of The9 Limited, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of The9 Limited.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of NCTY stock the variable cost ratio is equal to 627.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for NCTY stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 24.2% for The9 Limited.

Corporate tax rate of 27% is the nominal tax rate for The9 Limited. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the NCTY stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for NCTY are equal to 84.5%.

Life of production assets of 17.6 years is the average useful life of capital assets used in The9 Limited operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for NCTY is equal to -562.9%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $-71.6139262394 million for The9 Limited - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 16.038 million for The9 Limited is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of The9 Limited at the current share price and the inputted number of shares is $0.0 billion.

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